Internal Trade Class 11 Business Studies | CBSE Final Exams Revision 2026

It is important for students to learn Internal Trade Class 11 for Business Studies. Learn the concept easily as explained by PW Commerce Wallah. Internal Trade serves as the backbone of a nation’s economy, ensuring that goods move seamlessly from factory floors to your doorstep.

Based on the latest curriculum, students must know about the complex web of middlemen, the survival strategies of small-scale vendors, and the massive operations of modern retail chains.

Enroll Now For Commerce Class 11

What is Internal Trade?

Internal Trade refers to the buying and selling of goods and services exclusively within the geographical limits or boundaries of a single country. This economic activity is confined to national frontiers. It is also known as Home Trade, National Trade, Inland Trade, or Domestic Trade, names important for understanding various question contexts. 

Internal trade is broadly categorized into two primary types: Wholesale Trade and Retail Trade. Here are the main features of Internal Trade:

1. Scope: All buying and selling of goods and services occur entirely within a single country.

2. Currency: All payments are transacted using the home country's currency, involving only a single currency.

3. Legal Formalities: Compared to international trade, internal trade involves no or very few legal formalities and significantly less complex documentation.
   
   

What is Wholesale Trade?

Wholesale Trade involves a wholesaler purchasing goods in bulk quantities from manufacturers and selling them in smaller quantities to retailers. The individual conducting this trade is known as a wholesaler. The typical flow of goods is Manufacturer → Wholesaler → Retailer. Wholesalers primarily deal in large quantities and provide essential services to both manufacturers and retailers. Here are the features of Wholesale Trade:

1. Link in the Chain: Wholesalers are a crucial link between the producer (manufacturer) and the retailer.

2. Scale of Operation: Wholesalers handle a large volume of products, dealing in bulk quantities.

3. Product Specialization: They generally deal in a single product line. For instance, a cold drinks wholesaler will stock only various types of cold drinks.

4. Capital Requirement: Wholesalers need a huge amount of capital to invest in and maintain large stock inventories.

5. Profit Margin: The margin of profit for a wholesaler is very low, as their earnings come from high sales volume rather than high individual item margins.

What are the Services Provided by a Wholesaler?

Wholesalers offer valuable services to both manufacturers and retailers.

What is Retail Trade?

Retail Trade involves a retailer buying goods from either a wholesaler or directly from a manufacturer and selling them in smaller quantities directly to the final consumer. The person engaging in this trade is called a retailer. The goods flow from Wholesaler / Manufacturer → Retailer → Customer. Below are the features of Retail Trade:

1. Final Link: The retailer represents the last link in the distribution chain, connecting the manufacturer/wholesaler to the consumer.

2. Direct Sale to Consumers: Retailers sell goods and services directly to customers.

3. Product Variety: Unlike wholesalers, retailers stock a wide variety of products, such as groceries, toiletries, and snacks, under one roof.

4. Scale of Operation: Retailers buy and sell goods in small quantities.

5. Customer Relations: They often maintain personal relationships with customers due to frequent interactions.

6. Location: Retailers are typically found in residential areas for customer convenience, unlike wholesalers often located in main markets.

7. Customer Outreach: They reach customers through various channels, including showrooms, telephone, and the internet.

8. Middleman Role: Retailers serve as a middleman between the wholesaler/manufacturer and the consumer.

What are the Services Provided by a Retailer?

Retailers provide essential services to both customers and wholesalers/manufacturers.

Classification of Retailers

Retailers are primarily classified into two major categories:

1. Itinerant Retailers

2. Fixed Shop Retailers

Who are Itinerant Retailers?

Itinerant Retailers are traders who do not have a fixed place of business. They move from place to place seeking customers. Examples include street vendors and hawkers. Here are the characteristics of Itinerant Retailers:

• Limited Resources: They operate with small capital and limited resources.

• Product Type: They typically deal in products of daily use.

• Customer Convenience: They deliver goods right to the customer's doorstep.

• No Fixed Establishment: They do not possess a permanent shop or showroom.

Types of Itinerant Retailers:

1. Hawkers and Peddlers: These retailers move door-to-door, selling low-value, non-standardized goods often carried on a handcart, bicycle, or head-load.

2. Market Traders: They set up shops at different places on fixed days or dates, such as weekly markets, specializing in a single product line and catering to lower-income groups.

3. Street Vendors (Pavement Vendors): These traders sell daily utility items (e.g., stationery, jewelry) in areas with high floating populations, like bus or railway stations, often maintaining a specific location once established.

4. Cheap Jacks: Operating from temporary independent stores, they deal in both goods and services, such as watch or shoe repair.

Who are Fixed Shop Retailers?

Fixed Shop Retailers maintain a permanent, fixed establishment for their business operations. Here are the characteristics of Fixed Shop Retailers:

• Greater Resources: They typically operate on a larger scale with more resources than itinerant retailers.

• Product Variety: They deal in a wide array of goods, including both durable and non-durable items.

• Credibility: Their permanent location instills more trust and credibility among customers.

Fixed Shop Retailers are further categorized into:

1. Small Fixed Shop Retailers

2. Large Fixed Shop Retailers

Small Fixed Shop Retailers

These are small-scale retailers operating from a fixed business location.

Types of Small Fixed Shop Retailers:

1. General Stores: Found in local colonies and residential areas, they sell items of daily utility, offer convenience, provide credit, and foster personal customer relationships.

2. Specialty Shops: These shops specialize in a single kind of good or product line, offering extensive variety within that niche. They are also known as single-line stores.

3. Street Stall Holders: Operating from small stalls, often at street crossings, they sell convenience items like snacks to passersby.

4. Second-Hand Goods Shops: They deal in used or second-hand goods such as old cars, furniture, or antique items, selling them at lower prices.

Large Fixed Shop Retailers

These are large-scale retail organizations requiring huge investment, large showrooms, and dealing in bulk stock.

The two main types are:

1. Departmental Stores

2. Multiple Shops (Chain Stores)

What are Departmental Stores?

A Departmental Store is a large retail showroom housing a number of departments under one roof. Each department specializes in one product line and operates almost as a separate shop with its own manager. Examples include D-Mart, Big Bazaar, and Vishal Mega Mart.

Features of Departmental Stores:

• Many departments operate under a single roof, offering a wide range of products from groceries to electronics.

• They are typically located in big cities and central locations.

• They provide numerous free services to customers and employ efficient, professional salesmen.

• Each department has a separate manager, offering good quality, reliable products.

Advantages of Departmental Stores:

• Economies of Scale: Bulk buying leads to lower per-unit costs.

• Benefit of Specialization: Each department is managed by a product line specialist.

• Central Location: Prime location attracts a large customer base.

• Easy Advertising: Large display and variety serve as advertising.

• Home Delivery: Many offer home delivery.

• Shopping Facility: Customers can buy diverse goods in one place.

• Service Element: They provide numerous customer services.

• No Fear of Cheating: Cash-only sales eliminate concerns about bad debts.

Disadvantages of Departmental Stores:

• Huge Capital Requirement: Establishing and running one is highly capital-intensive.

• Inaccessible to Ordinary Customers: Their location and clientele may make them less accessible to the general public, primarily catering to higher-income groups.

• High Operating Expenses: Large-scale operations incur significant costs for electricity, maintenance, staff salaries, and parking.

• Costly Goods: Products are often priced higher than in other retail formats.

• Lack of Personal Attention: Efficient sales staff may not provide personalized attention due to high customer volume.

• Lack of Credit Facility: All transactions are on a cash basis, with no credit offered.

• Social Discrimination: Their model can create a sense of social exclusion, primarily serving upper-middle and high-income groups.

What are Chain Stores?

Chain stores, also known as Multiple Shops, are retail systems with numerous outlets owned by a single proprietor or firm, spread across various locations. All outlets maintain uniformity in operations, pricing, and design, performing the same line of activity.

Features of Chain Stores

• Centralized Manufacturing: Goods are typically produced at a central location and distributed to branches (e.g., Bata, Raymond).

• Single Ownership: All shops in the chain belong to one individual or firm.

• Uniformity of Products: Products are consistent in size, quantity, and price across all branches.

• Uniformity in Decoration: All stores share a standardized appearance and layout, making them easily recognizable (Memory Tip: Think of major brands and their signature colors: Domino's is associated with blue. McDonald's is associated with red. Subway is associated with green.).

• Limited Product Line: Chain stores specialize in a specific and limited range of products (e.g., Bata for shoes, McDonald's for burgers).

• Focus on General Consumption Goods: They usually deal in items of frequent and general consumption.

• Extensive Area Coverage: They open many shops across wide geographical areas to meet demand.

Advantages of Chain Stores

• Fixed and Single Price: All branches sell at a fixed and single price, ensuring consistency and eliminating haggling.

• Elimination of Middlemen: Manufacturers often sell directly, removing wholesalers.

• Collective Advertisement: A single advertising campaign benefits all stores.

• Economies of Scale in Production: Centralized production leads to lower per-unit costs.

• Strong Public Goodwill: Widespread presence builds a strong brand image and public trust.

• Proximity to Customer: Branches are often conveniently located near customers.

• Easy Recognition: Uniform branding ensures instant recognition.

• Facility of Transfer of Goods: Excess stock can be transferred to branches with higher demand.

Disadvantages of Chain Stores

• Huge Capital: Opening multiple branches requires substantial capital investment.

• No Credit Sales: All sales are strictly cash-based.

• Limited Selection: Customers have a very limited selection of goods.

• No Home Delivery Facility: Generally not offered by non-food retailers.

• Heavy Loss Due to Change in Demand: A drop in demand for the specific product line can cause heavy losses across all stores.

• Lack of Personal Relations: Transactional sales prevent personal relationships with customers.

• Difficult Control System: Managing numerous branches from a single head office can be challenging.

• Monopoly in the Long Term: Dominant chains can lead to a monopoly, hindering new competitors.

• Lack of Freedom: Branch managers have no freedom to alter store design or add unapproved products.

What is GST (Goods and Service Tax)?

The Government of India implemented the Goods and Service Tax (GST) on July 1, 2017. Its guiding principle was "One Nation, One Tax" to create a unified national market and ensure smooth flow of goods and services. This reform aimed to simplify the tax structure, making business easier for all stakeholders. GST marked a fundamental shift from an origin-based tax system to a destination-based, single tax system, replacing multiple indirect taxes.

Key Features of GST

• Territorial Spread: GST is applicable throughout the entire country, including Jammu and Kashmir.

• Basis of Taxation: Levied on the supply of goods and services, rather than manufacture or sale.

• Tax System: It is a destination-based tax, meaning revenue goes to the state where consumption occurs.

• Types of GST:

• CGST (Central GST): Levied by the Central Government.

• SGST (State GST): Levied by the State Government.

• IGST (Integrated GST): Levied on inter-state transactions and imports/exports.

• GST Slabs: The system features three slabs: 5%, 18%, and 40%.

• Special Economic Zones (SEZ): Exports to or imports from SEZs are zero-rated, exempt from tax.

• Modes of Payment: GST can be paid electronically via NEFT, RTGS, online banking, credit cards, and debit cards.